Circularity has a hidden price: Who pays for fair and compliant recycling?

Source: The post  “Circularity has a hidden price: Who pays for fair and compliant recycling?’’ has been created, based on “Circularity has a hidden price: Who pays for fair and compliant recycling?” published in “Down to Earth” on 17th January 2026.

UPSC Syllabus: GS Paper-3- Indian Economy

Context: The circular economy is promoted as a sustainable solution to plastic waste, but in practice, fair and compliant recycling in India often operates at a financial loss. Project Protoprint in Pune exposes the hidden social, environmental, and economic costs of recycling that are not reflected in market prices.

About Project Protoprint

1. Project Protoprint was established by SWaCH, India’s first waste picker–owned cooperative, to enable waste pickers to move up the plastic recycling value chain.
2. The project aimed to create a fully compliant, waste picker–owned recycling unit that processed mixed post-consumer rigid plastics such as HDPE and polypropylene.
3. The unit prioritised fair wages, formal employment benefits, pollution control compliance, and integrated collection, aggregation, and recycling.

Key Economic Findings

1. The recycling unit incurred a loss of approximately ₹14.5 per kilogram of plastic processed, making financial self-sufficiency impossible.
2. In contrast, conventional recycling units that procured ready-made flakes and avoided full compliance showed marginal profits of around ₹0.7 per kilogram.
3. This difference demonstrates that profitability in the recycling sector is achieved primarily by externalising costs rather than through operational efficiency.

Hidden Costs of Recycling and Who Bears the True Cost

1. Many recycling units reduce costs by underpaying labour and failing to provide safe working conditions.
2. Environmental costs are externalised through untreated effluents, improper waste disposal, and residual waste burning.
3. Financial compliance is avoided by evading the 18 percent GST on plastic scrap, which keeps the sector largely informal.
4. Waste pickers and informal workers bear the cost through low incomes, job insecurity, and hazardous working conditions.
5. The environment bears the cost through pollution and ecological degradation caused by non-compliant recycling practices.
6. Responsible recycling units bear financial losses due to compliance becoming a first-mover disadvantage.

Structural Problems in the Recycling Economy

1. Recycling margins remain tied to the fluctuating prices of virgin plastics rather than the actual cost of fair and safe recycling.
2. Extended Producer Responsibility has functioned largely as a symbolic compliance tool instead of a financing mechanism.
3. Poor material design, including multilayered plastics and harmful additives, significantly reduces recyclability and increases processing costs.

Policy Reforms Required

1. Financing the True Cost of Recycling: Extended Producer Responsibility must be strengthened to finance the real costs of compliant recycling, including fair wages and environmental safeguards. Producer contributions should cover difficult-to-recycle plastics and be linked to demand creation for recycled content.
2. Rationalising Taxation and Formalisation: The 18 percent GST on plastic scrap discourages formalisation and forces transactions into informal channels. Rationalising GST rates would lower entry barriers, improve compliance, and integrate informal actors into the formal economy.
3. Improving Material Design: Material design must prioritise mono-material and recyclable packaging to improve recycling efficiency. Producers must be held responsible for the full life-cycle impacts of plastic products.
4. Simplifying Compliance: The regulatory approval process for recycling units must be simplified and expedited. Recycling should be recognised as a priority environmental service rather than being treated as a regulatory burden.

Conclusion: Project Protoprint demonstrates that circularity has a real cost that is currently borne by waste pickers, responsible recyclers, and the environment. A just and viable circular economy requires that these costs be internalised through producer responsibility, fiscal reform, and regulatory support.

Question: “The circular economy often masks the true social and environmental costs of recycling.” Discuss this statement in the context of India’s plastic recycling sector. Examine the challenges faced in ensuring fair, compliant, and economically viable recycling, and suggest policy measures to address them.

Source: Down to Earth